Hmmm...what version of photoshop are you using? Everytime I reduce my images to 128X128 and save as an ICO. My icons are always running smaller than yours, i.e., the dimensions are right but not size. Did you have to download any plugins to enable save as ICO?

I don't know how to help you... I'm using photoshop CS2, I can save as a icon any pictures that I want, big, small... even 600x600 or more, and the ico never where smaller then the pic... but hey, try just using the ico you made on a folder or something, maybe the ico file is just looking small